Annexe K: Template Letter to be issued to prospective NSSE
Purchasers

Dear [ ]

Scottish Government New Supply Shared Equity
Scheme

Property at [Insert address]

With reference to your proposed purchase of the property at [
Insert address] from [the Association/Council [
Amend/complete as appropriate] with financial support from Scottish Government through
the New Supply Shared Equity Scheme, the purpose of this letter is
to explain to you the nature and main features of the equity loan
from Scottish Government.

The basis of the
NSSE
scheme is that the price for the purchase of the house is partly
funded by the purchaser from their savings and from a commercial
mortgage, with the balance being funded by way of an "equity loan"
from the Scottish Government.

The main features of this equity loan are:

there is no set date by which you must repay the equity loan.
The loan does, however, become repayable if certain events or
circumstances occur, such as when you decide to sell the
property;

no interest is charged by Scottish Government on the equity
loan while it is outstanding and provided you are not in breach
of its terms;

the equity loan is expressed as a fixed percentage of the
value of the property, based upon the initial purchase price
which you pay. So if you pay £100,000 to buy your property
and receive a Scottish Government equity loan of £20,000,
this equity loan will represent a 20% equity stake in the
property. When the equity loan becomes repayable to Scottish
Government - for example, when the property is sold - the amount
to be repaid to Scottish Government is 20% of the sale price.
This may be more or less than the amount of the equity loan. For
example, if the sale price was £150,000 then the amount to
be repaid to Scottish Government will be 20% of £150,000 -
£30,000.

The main risk associated with the equity loan is that you must
comply with the applicable conditions while the loan is
outstanding. These conditions are set out in the shared equity loan
agreement which you must enter into with Scottish Government. Among
these conditions are a requirement that you must occupy your home
as your only place of residence, and a prohibition on letting your
home out to a third party unless Scottish Government has given its
prior consent. If you do breach any of the applicable equity loan
conditions and do not remedy the breach, you run the risk of
Scottish Government taking action to enforce the terms of the
shared equity loan agreement and of requiring repayment of the
equity loan.

You will require to grant a standard security over title to your
home in favour of Scottish Government to secure compliance with the
equity loan terms, which means that Scottish Government could take
steps to enforce its security in the event of a breach of the
equity loan conditions, which could result in you losing your
home.

There are no charges levied by Scottish Government as a
condition of making an equity loan available to an eligible
applicant, nor are any costs or charges levied during the period of
the equity loan. There are, however, administrative charges which
you need to pay to the administrative agent who administers equity
loans on behalf of Scottish Government if you wish to amend certain
aspects of your equity loan arrangements - for example, if you wish
to purchase all or some of Scottish Government's equity stake in
the property, or if you wish to re-mortgage. You may also incur
legal and valuation costs in relation to such matters.

Charges (which again can include legal and valuation costs) may
also be incurred if you are in breach of the equity loan
conditions, or fail to pay any sums which have become due and
payable by you. This will include interest at 2% above the base
rate of Royal Bank of Scotland on overdue sums.

If you have any questions relating to this letter or to the
Scottish Government equity loan, please contact [
Insert details]. We also recommend that you take independent financial
advice and legal advice before deciding to proceed with the
purchase of the property.